effect of human capital investment on · pdf fileglobal journal of human resource management...

Global Journal of Human Resource Management

Vol.3, No.6, pp.1-29, November 2015

___Published by European Centre for Research Training and Development UK (www.eajournals.org)

1 ISSN 2053-5686(Print), ISSN 2053-5694(Online)

EFFECT OF HUMAN CAPITAL INVESTMENT ON ORGANIZATIONAL

PERFORMANCE OF PHARMACEUTICAL COMPANIES IN KENYA

Emily A. Odhon’g

College of Human Resource Development

Jomo Kenyatta University of Agriculture and Technology, Kenya

Jacob Omolo

School of Economics

Department of Applied Economics

Kenyatta University

ABSTRACT: Provision of adequate health care services to their population remains a major

challenge for governments in Africa. In Kenya, the number of trained Pharmacists is increasing

with time but still insufficient relative to the population in need (one pharmacist for every 8,710

persons, or approximately 0.1 per 1000 persons. Kenya had about 8 pharmacists for every

100,000 people). It was estimated that for the country to meet its health related Millennium

Development Goals, the pharmacy workforce needed to grow by 28 per cent annually between

2010 and 2015. Whereas, Kenya’s population is estimated to be 43 million (provisional) in 2014,

the number of registered pharmacist in 2013 was 2,202 and rose to 2,355 with a ratio of 5

pharmacists per 100,000 persons. In summary we have approximately 5:100,000, meaning 5

pharmacists to 100,000 persons, while the requirement is approximately 1:10000, meaning 1

pharmacist to 10000 persons. The current numbers of pharmacists are not adequate for

achievement of the post-2015 Sustainable Development Goal 3. The study sought to establish the

effect of Human Capital Investment on Organizational Performance of Pharmaceutical

Companies in Kenya. The independent variables include: training, education, knowledge

management and skills development. The main underpinning theories in this study include:

Human Capital, Skill Acquisition and Sustainable Resource Theory. 200 observations were used

in the study. Study used questionnaires in data collection, descriptive and inferential statistics

used in the analysis. The found a positive significant relationship between human capital

investment and organizational performance. The study recommends provision of quality

education, relevant training linked to industry requirement, the study suggest adoption of

German Dual Vocational Education and Training system to facilitate and strengthen linkage

between education sector and the industry. Promotion of knowledge management through

teamwork, social networks and knowledge management systems; training on employability and

transferability skills to enhance Skills Development. The enterprises to go beyond traditional

apprenticeship, Soft skills assessment in schools, embrace technology and promote

intrapreneurship. The study also suggest introduction of Skill Development Fund to equip the

communities and businesses with relevant skills required in the dynamic global market place.

KEYWORDS: Human Capital, Human Capital Investment, Education, Training, Knowledge

Management, Skills Development, Soft Skills and Organizational Performance.

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INTRODUCTION

BACKGROUND OF THE STUDY

In an era of heightened corporate transparency, greater workforce mobility, and severe skills

shortages, culture, engagement, and retention have emerged as top issues for business leaders.

These issues are not simply an Human Resource problem (Global Human Capital Trend, 2015).

United Nations (2015) recognize that there are different approaches, visions, models and tools

available to each country, in accordance with its national circumstances and priorities, to achieve

Sustainable Development by 2030. To align with critical and emerging business goals, strategies

and metrics, organizations has to ensure that their human resources has a strong understanding of

the organization’s emerging and core business issues(Global Human Capital Trend, 2014). In

many economies, employers are searching for workers who possess behavioral skills such as

teamwork, diligence, creativity, entrepreneurship and entrepreneurship, essential to thrive in

today’s rapidly evolving, technologically driven globalized economies. Thus, just improving

workers’ technical and vocational skills will not always meet employers’ needs systems that

build skills will also have to ensure that these added behavioral attributes are in place (World

Bank, 2010). Kenya Vision 2030, intends to create a globally competitive and adaptive human

resource base to meet the requirements of a rapidly industrializing economy. To achieve this

much need to be done through life-long training and education (Republic of Kenya, 2007).

Human Resource must be invested in and leveraged efficiently in order for it to generate returns,

for the individuals involved as well as an economy as a whole. World Economic Forum reported

that the global economy is entering an era of talent scarcity that, if left unaddressed, will hinder

economic growth worldwide (World Economic Forum, 2013), As we move to knowledge based

economy, knowledge, skills and competencies constitutes a vital asset in supporting economic

growth and reducing social inequality in developing countries. Human capital investment is one

of the key factors in combating high and persistent unemployment and problems of low pay and

poverty (Ogunade, 2011). The concept of human capital has played an important role in the

neoclassical analysis of labour markets. This is particularly in regard to the role it plays in wage

determination. It has also come to dominate the economic analysis of education. The analysis of

human capital views education as one of the routes through which human capital is acquired. The

basis of human capital model is based on the premise that additional non-compulsory education

(schooling) increases the productivity of labour in a perfectly competitive market (Omolo, 2013).

Human Capital refers to the knowledge, expertise, and skill one accumulates through education

and training (Severine and Lila, 2009; Marimuthu et al.,(2009),; Dae-bong (2009); Malose and

Boris (2012; Afiouni (2013); Armstrong (2014), Odhong et al., 2014; Joshi et al., 2015). The

concept of Human Capital (HC) was initially formulated by Theodore Schultz in the early 1990,

as a way of explaining the advantages of investing in education on a national scale (Afiouni,

2013) cited in Odhong and Were (2013). The emphasis on human capital in organizations

reflects the view that market value depends less on tangible resources, but rather on intangible

ones, particularly human resources (Kulvisaechana, 2006) cited in Odhong et al., (2014).






Global Perspective

According to (Unites Nations, 2015), the Sustainable Development Goal 3: is to ensure healthy

lives and promote well-being for all at all ages. To achieve this goal, target 3.c is to substantially

increase health financing and the recruitment, development of the health workforce in

developing countries, especially in least developed countries and Small Island developing states.

Provision of adequate health care services to their population remains a major challenge for

governments in Africa. Unsatisfactory and inadequate access to essential drugs and other

healthcare commodities is a key limitation that impacts on people’s health in most developing

and Least Developed Countries (LCDs) (United Nations Industrial Development Organization,

2010). Globally the growth of pharmaceutical firms was between 4-6 per cent in 2010-2011

exceeding $825 billion (UNIDO, 2010). According to African countries supplying

pharmaceutical products to the Common Market and COMESA, Kenya exported US$43,677 in

2008 and this is likely to up (UNIDO, 2010).

In many developing countries, especially those in Asia and Africa, changes to the pharmacy

curriculum are made according to the needs of the pharmacy workforce. For example, in

countries such as Thailand, Pakistan, and India, where public health needs are overwhelming, the

traditional 4-year bachelor's degree in pharmacy program was replaced by a 5 or 6-year doctor of

pharmacy program in response to changes in the workforce, but no changes were made to the

pharmacy curriculum to greater emphasize public health and related subjects such as social

epidemiology, health promotion, social medicine (Hassali, 2011).

Germany’s current dual system has been shaped by prevailing legal norms, tradition, pedagogical

principles and institutional structures. It did not come about as a result of a rationally considered

design on a drawing board but instead developed gradually as the result of national social and

cultural history (Deibinger, 1997) cited in Euler (undated). Euler stated that the case of the dual

system lies in the historical model of on-the-job occupational training that existed within trades

and to which school-based and inter-company instruction were gradually added over time. The

continued development was strongly influenced by technical and economic conditions that could

no longer be adequately integrated into in-company and workplace-based training, resulting in

the need for other learning sites.

The dual system is especially well-developed in Germany, integrating work-based and school-

based learning to prepare apprentices for a successful transition to full-time employment. A

major strength of the dual system is the high degree of engagement and ownership on the part of

employers and other social partners. But the system is also characterised by an intricate web of

checks and balances at the national, state, municipal, and company levels that ensures that the

short-term needs of employers do not distort broader educational and economic goals. The VET

system as a whole is well-resourced, combining public and private funding. Germany has

maintained strong financial support and maintained the apprenticeship offer for the VET system

even during the crisis. Germany has a well-developed and institutionalised VET research

capacity, including the Federal Institute for VET, (BIBB), and a national network of research

centres that study different aspects of the system to support continuous innovation and

improvement in the VET system(OECD, 2010). In the US, The Skill Development Fund is

Texa’s premier job-training program providing customized training opportunities for Texas






businesses and workers to increase skill levels and wages of the Texas workforce. The Texas

Workforce Commission administers funding for the program. Success is achieved through

collaboration among businesses public community and technical colleges, workforce

development boards and economic development (Texas Workforce Commission, 2015).

Regional perspective

Lack of comprehensive data on pharmaceutical personnel in pharmaceutical sector is a gap in

national human resource policies in most developing countries (Ministry of Health and Social

Welfare, 2010). Tanzania is facing a major challenge in preparing its youth, the next generation

to become competitive members of East African and global economic community. Human

capital investment is critical for setting Tanzania on a trajectory towards middle income status, a

target it wants to reach by the year 2025(Planning Commission, 1999) cited Joshi et al., (2015).

Tanzania has 700 pharmacists, 300 pharmaceutical technicians, 250 pharmaceutical assistants

and a Pharmacist per population ratio of 1:50,000 (Mhamba and Mbirigenda, 2010). In most

facilities, there were no job descriptions for pharmaceutical personnel and work performance

was not an indicator for promotion consideration. According to the report, a total of 51 per cent

of the pharmacists considered moving from their workplaces to other sectors. As many as 74 per

cent of the pharmacist working at the Ministry of Health and Social Welfare (MOHSW)

considered moving to public facilities and Non-Governmental Organizations(NGOs) and nearly

all pharmacists working in the private health facilities while 50 per cent retailers indicated to

move to other places (Ministry of Health and Social Welfare, 2010).

Local Perspective

Kenya aspires to become globally competitive country offering high quality of life to all its

citizens by 2030. Attainment of this vision hinges on the extent to which the country is able to

create a competitive and adaptive human capital base to meet the requirements of a rapidly

industrializing and globalizing economy. All the three pillars of Kenya Vision 2030 (economic,

social and political) are anchored on the existence of a skilful, productive, competitive and

adaptive human capital base (Republic of Kenya, 2007). Effectiveness of human capital

investment, are therefore, imperative for achievement of Vision 2030 goals.

Under education and training, Kenya will provide globally competitive and quality education,

training and research, for her development (Republic of Kenya, 2007). In Kenya the

pharmaceutical industry consists of three segments; manufacturers, distributors and retailers and

all these play a major role in supporting the country’s health sector which is estimated to have

about 4557 health facilities country wide (Pharmaceutical Society of Kenya, 2010).

Pharmaceutical companies in Kenya are considered as one of the most important knowledge

intensive organizations and a great source of human capital (Pharmaceutical Society of Kenya,

2012). The manufacturing sector’s contribution to Gross Domestic Product (GDP) remained at

about 10 per cent. The sector’s recorded a growth of 3.4 per cent in 2014 compared to a growth

of 5.6 per cent in 2013. The growth was partly due to modest inflation, decrease in oil prices

which led to reduction in input costs. Formal employment in the manufacturing sector increased

by 2.9 per cent from 279.4 thousand in 2013 to 287.5 thousand Persons in 2014. The total value






of manufacturing projects approved by financial institutions rose by 30.3 per cent to Ksh. 237.9

billion in 2014 from Kshs. 182.6 billion in 2013 (Republic of Kenya, 2015).

Kenya is currently largest producer of pharmaceutical products in the common market for

Eastern and Southern Africa region supplying about 50 per cent of the regions market. Out of the

regions estimated 50 recognized pharmaceutical manufacturers, approximately they are based in

Kenya. The pharmaceutical sector consists of about 42 licensed pharmaceutical firms which

include local manufacturing companies and large multination corporations, subsidiaries or joint

ventures. These firms collectively employ over 2000 people, about 65% of who work in direct

production. The industry compounds and packages medicines repacking formulated drugs and

processing bulk drugs into doses using predominantly imported active ingredients and recipients

(Pharmaceutical Society of Kenya, 2010).

Table 1.1 below shows the total number of undergraduate pharmacy students by course and sex

from 2010/11 to 2014/15 academic years. The source of data is Kenyan Universities that

includes: University of Nairobi, Kenya Methodist University, University of Eastern Africa-

Baraton, Kenyatta University, Egerton University, Aga Khan University Hospital, Mount Kenya

University and Masinde Muliro University of Science and Technology. The 2014/15 academic

year data are provisional results (Republic of Kenya, 2015).

Table 1.1 Numbers of undergraduate pharmacy students by course and sex 2010/11-

2014/15

Undergraduate 2010/11 2011/12 2012/13 2013/14 2014/15

Medical Degree Male Female Male Female Male Female Male Female Male Female

Pharmacy 281 205 168 130 207 259 389 265 550 419

Source: (Republic of Kenya, 2015)

Table 1.2 shows the number of registered pharmacists and those in training, 2013 and 2014. In

2013, the total number registered pharmacists were 2,202. This gives a ratio of 5: 100,000. In

2014, the number of pharmacist registered were 2355, this gives a ratio of 5:100,000. This is still

far below the threshold required by the United Nations Industrial Development Organization,

(2010) where one pharmacist for every 8,710 persons, or approximately 0.1 per 1000 persons. In

2009, Kenya had about 8 pharmacists for every 100,000 people (Thoithi and Okalebo, 2009).

The data in Table 1.2 is convincing that in Kenya, the number of trained Pharmacists is

increasing with time but still insufficient relative to the population in need. In summary we have

5:100,000 while the requirement is 1:10000.






Table 1.2: Number of Registered Pharmacists and those in Training, 2013 and 2014.

Type of

Personnel

Registered Pharmacists In-Training

2013 2014

2013/2014

2014/2015 Number No. Per

100,000

Population

Number No. Per

100,000

Population

Pharmacist 2,202 5 2355 5 826 969

Source: Republic of Kenya, 2015).

Statement of the Problem

Provision of adequate health care services to their population remains a major challenge for

governments in Africa. In Kenya, the number of trained Pharmacists is increasing with time but

still insufficient relative to the population in need (one pharmacist for every 8,710 persons, or

approximately 0.1 per 1000 persons (United Nations Industrial Development Organization,

2010). Kenya had about 8 pharmacists for every 100,000 people (Thoithi and Okalebo, 2009). It

has been estimated that for the country to meet its health related Millennium Development Goals

(MDGs), the pharmacy workforce needs to grow by 28 per cent annually between 2010 and

2015. The Sustainable Development Goal 3: To ensure healthy lives and promote well-being for

all at all ages (United Nations, 2015). Whereas, Kenya’s population is estimated to be 43 million

(provisional) in 2014, the number of registered pharmacist in 2013 was 2,202 and rose to 2,355

with a ratio of 5 pharmacists per 100,000 persons (Republic of Kenya, 2015). In summary we

have approximately 5:100,000, meaning 5 pharmacists to 100,000 persons, while the

requirement is approximately 1:10000, meaning 1 pharmacist to 10000 persons, the number not

adequate to help achieve the post-2015 Sustainable Development Goal 3.

Kenya Pharmaceutical Companies are challenged in meeting increasing technical requirements

for pharmacists by a severe shortage of qualified technical personnel. Surprisingly, public

secondary and tertiary schools with technical and vocational education programs have played a

smaller role than expected in preparing workers for informal sector employment (Adams et al.,

2013). Moreover, pharmacist trained in Kenya lack an industrial orientation. There are basic

training institutions for pharmacists and pharmaceutical technologist at university and diploma

levels but these institutions do not have a demonstration centres to expose students. Students are

attached for a three month pre-registration exposure, but the time period is not adequate for full

training that can impact skills and experience of Pharma personnel. As a result of this situation,

the skills and know-how on production processes, engineering, management and retail are really

acquired by association and guidance on the job from the experienced personnel which is not

guaranteed (United Nations Industrial Development Organization, 2010). To provide basic

competency and skills to future pharmacy practitioners, there is no doubt that public health

instruction needs to be incorporated into core courses in the pharmacy curriculum (Hassali,

2011).






In real sense, Kenya’s economy is estimated to have expanded by 5.3 per cent in 2014, compared

to a growth of 5.7 per cent in 2013. However, the pharmaceutical firms that fall under the

manufacturing sector recorded a growth of 3.4 per cent in 2014 compared to a growth of 5.6 per

cent in 2013, hence reporting a decline. The contribution of the manufacturing sector to the

Gross Domestic Product declined also from 10.9 per cent in 2013 to 7.1 per cent in 2014. The

sector’s value added grew by 5.2 per cent while intermediate consumption increased by 4.3 per

cent, in review period compensation of employees rose by 14.9 per cent in 2013 which was a

slower growth than 17.1 per cent recorded in 2012 (Republic of Kenya, 2015). The unstable

performance can be attributed to few number or pharmacist in the market. Pharmaceutical

industry is a knowledge intensive industry that requires more attention on human capital

investment to create value. The study, therefore, seek to establish the effect of Human Capital

Investment on organizational performance of Pharmaceutical Companies in Kenya.

General Objectives

To establish the effect of human capital investment on organizational performance of

Pharmaceutical Companies in Kenya.

Specific objectives

i. Determine the effect of Training on Organizational Performance at Pharmaceutical

Companies in Kenya.

ii. Identify the effect of Education on Organizational Performance at Pharmaceutical

Companies in Kenya.

iii. Establish the effect of Knowledge Management on Organizational Performance at


iv. Investigate the effect of Skills Development on Organizational Performance at


Research questions

i. How does Training influence Organizational Performance of Pharmaceutical Companies

in Kenya?

ii. In which way does Education influence Organizational Performance of Pharmaceutical

Companies in Kenya?

iii. What is the effect of Knowledge Management on Organizational Performance of

Pharmaceutical companies in Kenya?

iv. How does Skills Development influence Organizational Performance Pharmaceutical

Companies in Kenya?






LITERATURE REVIEW

Theoretical Review

Theory is defined by Gill and Johnson (2002) cited in (Saunders et al., 2009) as a formulation

regarding the cause and effect relationships between one or more variables which may or may

not have been tested. Saunders et al., (2009) further explains that Theoretical framework is a

collection of interrelated ideas based on theories. It is a reasoned set of prepositions, which are

derived from and supported by data or evidence. It attempts to clarify why things are the way

they are based on theories.

Human Capital Theory

The origin of human capital goes back to emergence of classical economics in (1776) and

thereafter developed a scientific theory. After the manifestation of that concept as a theory,

Schultz (1961) recognized the human capital as one of the important factors of national

economic growth in the modern economy (Dae-bong, 2009). The theory is rooted from the field

of macroeconomic development theory Schultz (1993). Becker’s (1993) classic book, Human

Capital: A Theoretical and Empirical Analysis with special reference to education, illustrated

this domain. Becker argues that there are different kinds of capitals that include schooling,

computer training course and expenditures on medical care (Marimuthu et al., 2009). The theory

argues that a person’s formal education determines his or her earning power. The idea of human

capital originates from the observation that schooling develops certain qualities in people and

that these qualities enhance economic productivity and economic growth (Severine and Lila,

2009).

Gary Becker’s classic work, human capital (1964), elaborates on the notion of human capital in

the context of neoclassical economics. It registers that investment in human could be viewed as

similar to investment in other means of production, like factories or mines. In developing

Becker’s work further, another economist, Theodore Schultz, set out to map how rates of return

from education could be calculated in countries with different levels of income, different

attitudes to forgoing earnings to develop human capital (Severine and Lila, 2009). Human capital

theory holds that it is the key competences, skills, knowledge and abilities of the workforce that

contributes to organizations competitive advantage. It focuses attention on resourcing, human

resource development, and reward strategies and practices. According to Human Capital Theory,

education is an investment because it is believed that it could potentially bestow private and

social benefits (Odhong et al., 2014).

According to Armstrong (2012) cited in Odhong & Were (2013), Human capital theory helps to

determine the impact of people on the business and their contribution to shareholder value. It

demonstrates the HR practices that produce value for money in terms, for example, of return on

investment. According to Dae-bong (2009), Human capital theorists believe that education and

earning power are correlated, which means, theoretically, that the more education one has, the

more one can earn, and that the skills, knowledge and abilities that education provides can be

transferred into the work in terms of productivity. Human capital refers to the knowledge,

expertise, and skill one accumulates through education and training (Severine and Lila, 2009;






Marimuthu et al.,(2009),;Dae-bong (2009); Malose and Boris (2012; Armstrong (2014), Odhong

et al., 2014)

Human capital theorists have typically argued that organizations can increase their human capital

by internally developing the knowledge and skills of their current employees, and by attracting

individuals with high knowledge and skill levels from the external labour market. That is,

organizations can try to make and buy human capital. Human capital grows in two ways; when

the organization uses more of what people know and when more people know more of what is

useful to the organization (Choudhury and Mishra, 2010). Human capital theory as the main

underpinning theory in studies related to human capital, in this study the theory supports

variables such as knowledge management, education, training, and skills development as well.

The implication: HCI adds short-and long-term value from investments in the development of

knowledge and expertise in individuals and groups of individuals.

Skill Acquisition Theory

As defined by Vanpatten & Benati (2010) Skill refers to ability to do rather than underlying

competence or mental representation". According to Trofimovich& McDonough (2013), skill

theory "refers to a cognitive repetition phenomenon in which prior exposure to specific language

forms or meaning facilitates speaker's subsequent language processing". The scientific roots of

Skill Acquisition Theory can be found in different branches of psychology, which ranges from

behaviorism to cognitivism and connectionism (Dekeyser and Criado, 2013). This theory draws

on Anderson's Adaptive Control of Thought (ACT) model which itself is a kind of cognitive

stimulus-response theory (Ellis and Shintani, 2013). According to Chapelle (2009), this theory

falls under the category of general human learning. The theory assigns roles for both explicit and

implicit learning and, as a general theory of learning, it claims that adults commence learning

something through largely explicit processes, and with subsequent sufficient practice and

exposure, move into implicit processes. Development, within this theory, entails the utilization of

declarative knowledge followed by procedural knowledge, with the latter’s automatization

(Vanpatten & Benati, 2010).

As elaborated by Vanpatten and Benati (2010), using declarative knowledge involves explicit

learning or processes; learners obtain rules explicitly and have some type of conscious awareness

of those rules. The automatization of procedural knowledge entails implicit learning or

processes; learners begin to proceduralize the explicit knowledge they own, and through

situational suitable practice and use, the behavior becomes second nature. This theory supports

the skills development as an independent variable in the study. It assisted in answering the

research question on how skills developments influence performance.

Sustainable Resource Theory

Sustainable Resource Theory is much like scarce resource theory except for one major point: the

concern for the long-term versus short-term agenda. Thurow (1993) informs us that “in the

future, sustainable advantage will depend on new process technologies and less on new product

technology. New industries of the future depend on brain power. A man-made competitive

advantage replaces the comparative advantage of Mother Nature (natural-resources endowment)

or history (capital endowments). The implication of this theory to this paper being that HCI must






add value to creating sustainable long-term economic performance (Swanson and Holton III,

2001).

CONCEPTUAL FRAMEWORK

According to Young (2009), conceptual framework is a diagrammatical representation that

shows the relationship between dependent variable and independent variables. In the study the

conceptual framework shows the relationship between human capital investment and

organizational performance in Kenya. The study sought to establish the effect of Human Capital

Investment on organizational performance of Pharmaceutical Companies in Kenya.

Influence

Figure 2.1: Conceptual framework

EMPIRICAL REVIEW

Shaheen et al.,(2013) conducted an empirical study on employees training and organizational

performance: mediation by employees performance. The intention of this specific study was to

determine the impact of training on employee performance as well as on organizational

performance and employee performance mediating role between employee training and

organization performance. The research proposed the way the teachers’ effectiveness could be

Training

-On job training

-Off job training

-output

Education

-Level

-type

-Quality

Knowledge management

-Acquisition

-Application and sharing

-dissemination

Skills development

-employability skills

-Experience

-qualification

Organizational

performance

Financial

performance-

- Profitability

- Productivity

Non financial

performance

-favorable work

environment,






improved simply by suitable education and training. Both quantitative and qualitative methods

were used; questionnaire used for data collection involving 220 questionnaires that were

dispersed amongst schools teachers, out of those 197 received with 90 percent turnover. SPSS

was used for data analysis and policy based on results presented for ensuring training

effectiveness and enhancing employee’s performance. With support of SPSS, correlation and

regression ended up being conducted to generate results. Overall results revealed significant and

positive association between training and organization performance. The mediating role of

employee performance also gave positive result. Generally, the model supported well both

theoretically and statistically.

Ravi et al., (2013) did a Study on Human Capital Investments and Employee Performance: An

Analysis of IT Services Industry. The study examined whether Human Capital Investment is

directed toward employee training is effective in improving employee performance. The panel

data set was used to link formal training with performance at the individual employee level.

Using a dynamic panel model, the study identified a significant positive impact of training on

employee performance. A unit increase in training is linked to a 2.14 per cent increase in an

employee performance. The study also found that general training that an employee can utilize

outside the focal firms improves employee performance.

Seleim et al (2007) cited in Maran and Maimunah (2009) in their study analyzed the relationship

between human capital and organizational performance of software companies. They found that

the human capital indicators had a positive association on organizational performance. These

indicators such as training attended and team-work practices, tended to result in superstar

performers where more productivity were translated to organizational performance. we can

conclude that human capital indicators enhances the organizational performance directly or

indirectly.

Ariga and Brunello (2009) conducted a study to investigate the relationship between education

and employer- provided training, both on-the-job and off-the-job, using a unique dataset drawn

from a survey of Thai employees conducted in the summer of 2001. The authors found a

negative and statistically significant relationship between educational attainment and on-the-job

training (OJT) and a positive and statistically significant relationship between education and off-

the-job training.

Thomas et al., (2009) conducted a study to establish how broadly does education contribute to

job performance? It provides a meta-analysis on the relationships between education level and 9

dimensions of job behaviors representing task, citizenship, and counterproductive performance.

Results here show that, in addition to positively influencing core task performance, education

level is also positively related to creativity and citizenship behaviors and negatively related to

on-the-job substance use and absenteeism.

Barro and Lee (2010) estimated that increasing average years of schooling by one year increases

per capita GDP by 1.7% to 12.1% depending on specification. Overall studies found that

education significantly and positively correlated with economic growth and argue that causation

runs from education and growth in line with human capital growth models. In addition, existing

employees will be motivated to attain additional education for an increase in compensation. The






organization saves money by retaining existing employees in addition to developing stronger

skill sets that will increase productivity.

According to Hecht et al., (2011) the process of successful implementation of knowledge

management has three stages: adoption, acceptance, and assimilation. According to Barrick

(2011), knowledge is a body of information, usually of a factual or procedural nature, about a

particular domain that makes for successful performance of a task. A distinction was made by

Ryle (1949) cited in Armstrong (2009), between ‘knowing how’ and ‘knowing that’. Knowing

how is the ability of a person to perform tasks, and knowing that is holding pieces of knowledge

in one’s mind. Knowledge management is a process that transforms individual knowledge into

organisational knowledge

Jelena, et al., (2012) conducted a study on the impact of knowledge management on

organizational performance. The aim of this paper is to show that through creating,

accumulating, organising and utilising knowledge, organisations can enhance organizational

performance. The impact of knowledge management practices on performance was empirically

tested through structural equation modelling. The sample included 329 companies both in

Slovenia and Croatia with more than 50 employees. The results show that knowledge

management practices measured through information technology, organizations and knowledge

positively affect organizational performance.

Vision 2030 recognizes that Kenya’s pool of talent is small and inadequately trained for

integration into the job market. Measures are therefore taken to improve the national pool of

skills and talent through training that is relevant to the needs of the economy. The current

transition rate from secondary level education to university will be increased and post graduate

training strengthened, particularly in science and technology (Republic of Kenya, 2007). A study

by World Bank (2010) showed that information on learning outcomes indicates that schools in

many developing countries are failing to teach Foundational Cognitive skills, much less the

expert thinking and complex communication and occupational skills needed to function

effectively in the modern labor market.

Skills and skills development are essential component of all efforts in this challenging era. Too

many workers are simply unprepared to meet the needs of firms, particularly in more competitive

economic environments. Skills are at the core of improving individuals ‘employment outcomes

and increasing countries ‘productivity and growth. This is particularly relevant as today’s

developing and emerging countries seek higher sustained growth rates (World Bank, 2014).

Skills development programmes enable employees gain employability. Employability includes

skills, knowledge and competencies that enhances a worker’s ability to secure and retain a job,

progress at work and cope with change, secure another job if he or she so wishes or has been laid

off, and enter more easily into the labour market at different periods of his or her lifecycle

(Omolo, 2013; Franz and Omolo, 2014).

Josan (2013) has conducted research through content analysis to analyze the relationship

between Human Capital & Organizational effectiveness. Organizational effectiveness is

characterized by competitiveness, Innovation and excellence. Competitiveness depends on skills

& human capital investment. Human capital investment is characterized by investing in






education, health & training. She narrates that globalization has resulted in new economy named

as knowledge economy, in which human capital variables education & training- plays a

significant role. Based on the existing literature it was analyzed that investment in human capital

is directly proportional not only with the productivity of the organizations- trainings increase

productivity by 16%; but also with profitability. An increase of over twice the size of the wages

increased because of trainings was witnessed in materials. It was also concluded that in strategic

triad- Business strategy, Human capital strategy and Human Resource Strategy – human capital

strategy is a critical component.

Sutia et al.,(2013) conducted a study on the Influence of Human Capital Investment, Leadership

and Strategic Orientation on Airport Performance using primary and secondary data, the samples

of the study were 25 Airports. The sampling technique employed was census. The results of the

study show that human capital investment and strategic orientation will increase company

performance.

METHODOLOGY

The study adopted Descriptive Research Design. According to Serekan (2010), a good research

design has a clearly defined purpose and has consistency between the research questions and the

proposed research methods. While according to Cooper and Schindler, 2014), if the research is

concerned with finding out who, what, where, when or how much, then the study is descriptive.

According to Walliman (2011) descriptive research attempts to examine situations in order to

establish what is the norm, that is, what can be predicted to happen again under the same

circumstances.

The study targeted registered pharmacists in the pharmaceutical industry, who are employees of

the retail companies. There are about 42 companies listed as Local Pharmaceutical Companies in

Kenya. Out of 2,775 pharmacists who are in the country, 2,063 had been registered to practice by

April, 2009, Kenya had about 8 pharmacists for every 100,000 people (Thoithi and Okalebo,

2009). Kenya’s population is estimated to be 43 million (provisional) in 2014, the number of

registered pharmacist in 2013 was 2,202 and rose to 2,355 with a ratio of 5 pharmacists per

100,000 people (Republic of Kenya, 2015). Therefore, the study considered 2,355 as the target

population.

Williman (2011) argued that no sample will be exactly representative of a population. According

to Kothari and Garg (2014) the following is the procedure of determination of Sample size when

estimating a percentage or proportion. For example, in this study what should be the size of the

sample if a simple random sample from a population of 2355 items is to be drawn to estimate the

per cent defective within 2 per cent of the true value with 95.5 per cent probability? First of all, I

shall have to specify the precision and the confidence level and then I worked out the sample size

as under: e(error margin) in this case is 0.02; level of significance is 95.5%; z tabulated value is

2.005.

where p = sample proportion,






q = 1 – p;

z = the value of the standard variant at a given confidence level and to be worked

out from table showing area under Normal Curve;

n = size of sample.

In case of finite population as in this study the below stated formula will be applicable:

qpzNe

Nqpzn

..)1(

...22

2

From the equation

N = 2355;

e = .02 (since the estimate should be within 2% of true value);

z = 2.005 (as per table of area under normal curve for the given confidence level of 95.5%).

Let me assume p to be p = .02

2.0102.0005.21235502.0

235502.0102.0005.222

2

02.1

632.184 = 182. From the computation, the sample size was 182

The study adopted purposive and simple random sampling technique. In simple random

sampling the researchers or fieldworkers have the freedom to choose whomever they find: since

most companies headquarters are within Nairobi, hence the data was collected within Nairobi.

Purposive sampling is a non-probability sampling technique that conforms to certain criteria

(Cooper and Schindler, 2014). Purposive or judgmental sampling enables a researcher to use his

or her own judgment to select case that will be best enable him or her to answer the research

questions and to meet the research objectives (Saunders et al., 2009).

Pilot Testing

A pre-test of a questionnaire or other type of survey on a small number of cases in order to test

the procedures and quality of response (Williman, 2011). According to (Cooper and Schindler,

,2014; Mugenda and Mugenda, 2010) pilot test is conducted to detect weaknesses in design and

instrumentation to provide proxy data for selection of probability sample. It should, therefore,

draw subjects from the target population and simulate the procedures and protocols that have

been designated for data collection. For example, if the study is a survey to be executed by mail,

the pilot should be mailed. According to Saunders et al.,(2009), the purpose of pilot test is to

refine the questionnaire so that respondents will have no problems in answering the questions

and there will be no problems in recording the data. In addition, it will enable the researcher to






obtain some assessment of the questions validity and reliability of the data that was collected.

For most students questionnaires, the minimum number for a pilot is 10, although for large

surveys between 100 and 200 responses is usual. From the computation, 10 per cent of 182 is 18.

For this study 18 questionnaires were used for pilot testing that forms 10 per cent of the total

sample size.

Reliability

Reliability refers to the extent to which your data collection techniques or analysis procedures

will yield consistent findings (Saunders et al., 2009). Reliable instruments can be used with

confidence that transient and situational factors are not interfering. Reliable instruments are

robust; they work well at different times under different conditions. This distinction of time and

condition is the basis for frequently used perspectives on reliability - stability, equivalence, and

internal consistency (Cooper and Schindler, 2014). According to (Mugenda and Mugenda,

2010), reliability is using the internal consistency technique where data is determined from

scores obtained from a single test administered. The score obtained in one item correlate among

themselves. Cronbach’s Coefficient Alpha was computed to determine how items correlate

among themselves. Cronbach’s Alpha is a general form of the Kunder-Richardson (K-R) 20

formula )1)((

)2)((

2

2

20

K

KKR

S

sS

Where 20KR = Reliability coefficient of internal consistency;

K = Number of items used to measure the concept

S2

Variance of all scores

2sVariance of individual items

Interpretation: A high coefficient will imply that items correlate highly among themselves.

According to Sekaran, (2010) a value of at least 0.7 is recommended.

Correlation coefficient

An important aspect is the different measurement of these relationships, such as assessing the

direction and degree of association, statistically termed correlation coefficients. The commonly

used coefficients assume that there is a linear relationship between the two variables, either

positive or negative. In reality, this is seldom achieved, but degrees of correlation can be

computed, how near to a straight line the relationship is. A positive relationship is one where

more of one variable is related to more of another, or less of one is related to less of another. For

example, more income relates to more political power, or less income relates to less political

power. A negative relationship is one where more of one variable is related to less of another or

the other way round (Williman, 2011). The correlation coefficient between variables in this study

was determined by:






1

,

yx

YXCovr

Multiple Regression Analysis

According to Kothari and Garg (2014) Regression is the determination of a statistical

relationship between two or more variables. In simple regression, we have only two variables,

one variable (defined as independent) is the cause of the behaviour of another one (defined as

dependent variable). Regression can only interpret what exists physically, there must be a

physical way in which independent variable X can affect dependent variable Y. According to

Kothari and Garg (2014) when there are two or more than two independent variables, the

analysis concerning relationship is known as multiple correlation and the equation describing

such relationship as the multiple regression equation. Multiple regression equation assumes the

form: xbxbaY2211

^

Where X1 and X2 are two independent variables and Y being the

dependent variable, and the constants a, b1 and b2. This is a technique used to measure the effects

of two or more independent variables on a single dependent variable measured on interval or

ratio scales, e.g. the effect on income due to age, education, ethnicity, area of living, and gender

(Williman, 2011). Performance has to be regressed against four variables; education, training,

knowledge management, and skills development. The equation of firm performance was

expressed in the following multiple regression model.

443322110 XXXXYs

Where sY firm performance

0 = Constant

X1 = Training

X2 = Education

X3 = Knowledge management

X4 = Skills development

= error term

5511 XX Regression coefficient or coefficient of determination, (R2) of five

variables.

Regression equation was preferred because it helps avoid overestimating the impact of adding an

independent variable on the amount of inconsistency explained by the estimated regression

equation (Kothari and Garg, 2014). In this study 200 observations were analysed. This included

182 sample size and the 18 questionnaires for the pilot test. Both added up to 200.






RESULTS AND DISCUSSION

Reliability Analysis

Reliability of the measurement instruments was analysed using Cronbach’s Alpha Coefficient.

This helped to determine the consistency and stable measurement. According to Mugenda and

Mugenda (2010), Cronbach’s Alpha is a coefficient of reliability that gives an estimation of data

generalization without any bias. Table 4.1 indicates that the data was reliable since a coefficient

value of between 0.820 and 0.903 was obtained on all the research variables. Muna (2012)

conducted a reliability analysis that produced value of 0.8248 which is in line with the

Cronbach’s Alpha value in this study.

Reliability Analysis

Independent variables Cronbach’s Alpha

Results

Comments

Training 0.903 accepted

Education

Knowledge Management

Skills Development

Organizational Performance

0.902

0.897

0.868

0.820

accepted

accepted

accepted

accepted

Total 200

DESCRIPTIVE STATISTICS

Bassi’s Human Capital Measurement score was used (Bassi et al., 2007). The Human Capital

Measurement system of scores was used indicated as 0-1 score was rated good; 2-3 score rated

adequate and 4 and above rated as poor. Table 4.5 indicates training has a mean score of 1.82,

standard deviation of 1.04 and variance of 1.08. Education has a mean score of 1.95, standard

deviation of 1.13 and variance of 1.28. Knowledge management has a mean score of 2.26,

standard deviation of 1.15 and variance of 1.32. Skills Development has a mean score of 2.31,

standard deviation of 1.15 and variance of 0.71. The cumulative mean of human capital

investment is 2.09 rated adequate. This implies that human capital investment influence

organizational performance as it is rated good in the human capital management measurement

score. The results of the study are consistent of (Wang et al., 2008) whose results showed

significant positive relationship between human capital investment and organizational

performance.

Table 4.5 Effect of human capital investment on organizational performance

Human capital investment

N Mean Standard Deviation

Variance

Training Education

200 200

1.82 1.95

1.04 1.13

1.08 1.28

Knowledge Management Skills Development

200 200

2.26 2.31

1.15 1.85

1.32 1.72

Total 200 100 1.3 1.4






The respondents were asked to give their views by agreeing or not agreeing that inadequate

training affect individual performance. 85.5 per cent agreed and 10 per cent disagreed. 50.5 per

cent indicated that they do get relevant training in school but much more is needed to train them

in the industry. 60.8 per cent indicated that their organizations do not conduct training need

analysis to support them on job training. 55.5 per cent indicated that they get support or

opportunity for career development. 87.8 per cent of the respondent indicated that their level

education matter and has major influence on the performance. They indicated that

pharmaceutical industry is knowledge intensive and very dynamic with new development of

technology and complication in health sectors. 60.8 per cent of the study respondents indicated

that the quality of education matters a lot in the pharmaceutical industry. 80.8 per cent indicated

that organizations need to encourage both formal and informal education to enhance their

individual performance and that of the organizations.

The study respondents were asked if they are provided with the necessary manuals and

procedures they need to help the do their job. 50 per cent indicated that they are given but 45 per

cent indicated they get through their own effort, while 55 per cent indicated not given. 45 per

cent indicated that their organizations promote team work to improve knowledge sharing at their

work place, through autonomous work group and team building activities occasionally. 45.9 per

cent indicated that their organizations has knowledge management systems that facilitate

knowledge transfer and dissemination. In promoting Skills Development, only 45.8 per cent of

the employees agreed that their organizations conduct orientation or on boarding for new

employees to enable them get introduced to the organizations systems and work processes. 50.2

per cent indicated that they are provided with necessary tools for work. 60 per cent of the

respondents indicated they have never had skills audit conducted in their organizations to

establish skills lacking or required in order to deliver effectively.

INFERENTIAL STATISTICS

Table 4.6 Result of Correlation analysis for Human Capital Investments and

Organizational Performance of Pharmaceutical Companies in Kenya

Table 4.5 gives a summary of the results of correlation analysis. The variables considered were:

training, education, knowledge management, skills development and organizational performance.

Variable Training Education Knowledge

Management

Skills

Development

Organizational

Performance

Training

Education

Knowledge

Management

Skills Development

Organizational

Performance

1.0000

0.5969

0.6622

0.6301

-0.0530

1.0000

0.6173

0.5703

0.2564

1.0000

0.6306

-0.0292

1.0000

-0.1276

1.0000






The results of the analysis show that there is a positive correlation between training and

education. The correlation coefficient between the two variables is 0.60 implying a strong

positive correlation between the two variables. Positive attributes of elements of education

promotes effective training and vis versa. The study results are in tandem with results of (Ariga

and Brunello, 2009) who found a negative and statistically significant relationship between

educational attainment and on-the-job training (OJT) and a positive and statistically significant

relationship between education and off-the-job training.

The results presented in table 4.5 also indicate that there is a strong positive correlation between

training and knowledge management. The correlation coefficient is 0.66. This finding is

consistent with the results of interviews conducted which indicated that most of the pharmacists

would prefer training, to enhance their performance. Pharmacists interviewed indicated that

knowledge management is weak in their respective organizations thereby undermining,

knowledge creation, sharing, dissemination and feedback. Overall knowledge management

systems that are useful in collecting information and making it available to employees were not

in place in most organizations.

The study results are consistent with that of Nasiripour (2012) who found the correlation

coefficient of training systems for knowledge management and productivity was 0.191 and p-

value was 0.007, that proved to be meaningful and so a good correlation between training and

knowledge management. A positive correlation between training and knowledge management is

also reflected in the positive correlation between education and knowledge management. The

correlation coefficient between the two variables is 0.62, implying a strong positive relationship.

The study results show that there is a strong positive correlation between training and skills

development. The correlation coefficient is 0.63. The study results also show strong positive

correlation between skills development and education. The correlation coefficient is 0.57. This

implies that the training, education and skills development are very key for organizational

performance within the pharmaceutical industry, since the correlation coefficients were found to

be positive and strong. This implies that the pharmacy industry puts more emphasis on

education, training and skills development. The study results are in tandem with results of (Wang

et al., 2008) who found that staff training and development at (-0.134, -0.233 and -0.138; p-value

0.000 of human capital investment show significant correlation with the three dimensions of

organizational performance.

The study results show that there is a weak negative correlation between training and

organizational performance that implies that the pharmacist complained of inadequate training.

On job training, off-job training, on boarding not conducted well. Implication is that there are no

clear lines or policies for staff development within the sector. The study results also show that

there is a weak positive correlation between educations with a correlation coefficient of 0.26.

This study results is in tandem with the results of (Ariga and Brunello, 2009) who found a

negative and statistically significant relationship between educational attainment and on-the-job

training (OJT) and a positive and statistically significant relationship between education and off-

the-job training.






The study results show that there is a weak negative correlation between knowledge management

and organizational performance within the pharmaceutical industry. This implies that most

organizations do not promote knowledge management and may not have knowledge

management systems that can promote creation, sharing and dissemination. The study results are

consistent with results of Nasiripour (2012) who found correlation coefficient between

knowledge acquisition and knowledge management and productivity was 0.124 and p-value was

0.082.

According to the results, there is a weak negative correlation between Skills Development and

organizational performance. This implies that the organizations does not promote employability

skills, no challenging job to enhance experience of pharmacists. Skills Development realizes

workforce competency. Bonin and Holzl (2010) found that skills upgrading has direct positive

growth effects associated with the stronger labour force attachment and the better employability

of more-qualified workers.

Generally, training, education, knowledge management, and skills development has a statistically

significant relationship with organizational performance. This is manifested in the estimated

correlation coefficient of the respective variables, which are all less than 0.5. The findings of this

study reveals that the human capital investment has a significant positive relationship with the

organizational performance, with knowledge management and skills development taking the lead

as the most important indicator and element of human capital investment that promote

organizational performance. Correlation coefficients obtained results (r=0.489; p-value = 0.000),

indicating statistically significant correlation between human capital investment and

organizational performance. The study results are in consistent with result found by (Tadic et al.,

2015), who in order to test set hypothesis about relations between human capital investment and

business excellence of Croatian Companies, correlation coefficients obtained results (r=0.262; p-

value =0.003) indicating statistically significant correlations between the level of human capital

investments and its overall business excellence.

Table 4.6 shows a summary of the regression results on effect of human capital investment on

Organizational Performance of pharmaceutical companies in Kenya. The results presented in

table 4.6 shows that training, education; knowledge management and skills development

collectively determine the performance.






Table 4.7: Regression result of Effect of Human Capital Investment on Organizational

Performance of Pharmaceutical Companies in Kenya

Variable Coefficient Standard

Error

t-statistic P-Value

Training 0.3353 0.0728 4.60 0.000

Education -2.0098 1.0227 -1.97 0.051

Knowledge Management

Skills Development

Constant

Number of Observations

F-Statistic

Prob > F

R-Squared

Adjusted R-Squared

0.389

0.0497

12.325

200

46.7

0.000

0.489

0.479

0.074

0.0622

3.1936

5.25

0.80

3.86

0.000

0.042

0.000

Results presented in table 4.6 shows that training, education; knowledge management and skills

development jointly determine organizational performance in the pharmaceutical industry. The

F-statistic, which is a measure of joint determination has an estimated value of 46.7 and a

probability statistic of 0.000 (Prob > F=0.000). This means that the four independent variables

are jointly important in explaining the changes in organizational performance in the

pharmaceutical companies. The Adjusted R-squared is 0.49 which means that the model explains

48 per cent changes in the organizational performance attributed to the independent variables

collectively. We can also deduce that 51 per cent of once soft skills influence individual

performance. The study results concur with (Barnard, 2008) cited in (Aworanti, 2012) who

asserted that in addition to academic, qualification, graduates need to posses team work skills,

good communication skills and the ability to appreciate others’ perspective to be more proficient.

He further states that when it comes to intellectual capability, recruiters rated transferable skills

such as grasping complex information (68 per cent) and seeing problems from different angles

(50 per cent above) academic ability.

The regression results presented in table 4.6 shows that training has a positive relationship with

organizational performance. The coefficient of this variable is 0.34 with a t-value of 4.60.

According to the results, the coefficient of this variable is statistically significant at 1 per cent

level of significance. This results is in tandem results of (Sheehan, 2014) whose results found

that for Poland, the coefficients are positive and there are significant associations with changes in

training and development (p>.10 for overall and firm-specific and p<0.001 for general. The

strongly significant association between the coefficient for Poland and changes in general

training and development investment is likely to be a sign of its relatively stable external

environment.

The regression results show that education and organizational performance not moving in the

same direction in the pharmaceutical industry. According to the estimation, the coefficient for

education is -2.01. The parameter estimate has a t-value of -1.97 and a p-value 0.051. This






implies that the coefficient of the variable is statistically significant at 1 per cent level of

significance thereby confirming that education is an important determinant of organizational

performance. This is in tandem (Thomas et al., 2009) who found that educational level was

related to objective measures of task performance at 0.24, peer rated task performance at 0.18,

supervisor-rated task performance at 0.09 and self-rated task performance at 0.06. However,

found that educational level was weakly related to performance in training programs at -0.03.

The estimation results show that there is a positive relationship between knowledge management

and organizational performance. According to the estimation results, the coefficient of this

variable is 0.389. The parameter has a t-statistic of 5.25 and a corresponding p-value of 0.000.

This implies that the coefficient of the variable is positive and statically significant at 1 per cent

level of significance. This is in tandem (Rasula et al., 2012) who found significant relationship

between knowledge management and organizational performance with the parameter t-statistic

of 11.67; coefficient 0.94; R-Squared indicating 89 per cent variance of knowledge management

on organizational performance.

According to the estimation result, skills development is an important determinant of

organizational performance. The result shows the coefficient of the variable at 0.05 and that it is

positive. The t-statistic is 0.80 while the p-value is 0.042. The estimates confirm that the

coefficient of skills development variable is statistically significant at 5 level of significant. The

study results can be linked to the findings of Global Human Capital Trend (2015) that indicated

that companies that transform their learning and development organizations are not only able to

accelerate skills development, but also can dramatically improve employee engagement and

retention that impacts positively on organizational performance.

The study results represented in Table 4.6 indicates that the coefficient of the constant is

statistically insignificant. This confirms that there is no other important variable that determines

the changes in organizational performance that was left out in the regression model. It, therefore,

shows that the elements of human capital investment, namely: training, education, knowledge

management and skills development adequately explain the changes in organizational

performance. This is consistent with the coefficient of joint determination which was estimated

at 0.49 with a probability of 0.0000. The results also imply that 51 per cent of individual

performance could be attributed to once Soft Skills. According to (Aworanti, 2012) Soft skills

are all the skills other than technical skills that are required for successful career. Aworanti

(2012) study results revealed that soft skills have strong effect on the performance of graduates

in their work despite the fact that they were not directly taught in schools. The study result also

concurs with Bosley (2007) study results which showed that 50 per cent of the responding

companies reported that they take writing into consideration when hiring and promoting

professional employees. The study results also concurs with (Ahmed et al., 2013) whose study

results showed that high demand soft skills include communication skills (87 per cent), analytical

and problem solving skills (70 per cent) and team player 67 per cent. The study results are also in

tandem with results by Marimuthu et al., (2009) who found that human capital investment

variables – training, education, knowledge and skills are closely linked to fundamentals of

economics and firm performance.






IMPLICATION TO RESEARCH AND PRACTICE

The findings of the study will help the Management of Pharmaceutical Companies in Kenya in

formulating policies that promote human capital investment; develop strategies of human capital

investments that align to the organizations goals and objectives and invest in human capital

investment practices that promote productivity and enhance organizational performance. The

study also contributes to the body of knowledge for utilization by other scholars and researchers

who will find the study relevant. From the avenues created by this study on possible areas for

future studies, researchers can identify a research problem, replication can be done to develop a

theory, solutions to existing phenomena can be provided through supporting data and

information. Research in human capital investment areas provides opportunities and information

for economic, organizational and personal development. This study also provides advice to

government policy makers while addressing issues of human capital investment to help develop

a solid human capital base in Kenya in line with the requirement of Kenya Vision 2030. The

study also identifies a call for action to strengthen the linkages between the education and

training institutions with the industry so as to provide skills, knowledge and capacities that

conform to the industry requirement to avoid skills mismatch and improve productivity.

CONCLUSIONS

The study results give empirical evidence that the relationship between human capital investment

and organizational performance is statistically significant. The study variables, education,

training, knowledge management and skills developments both has significant relationship with

the organizational performance. Human capital investment is a tool for value creation and a form

human capital risk management strategy for sustainable organizational performance.

Inadequate training affects individual performance and that of the organization as well. It is

important for employees to get relevant training in school and on job training should be relevant

and specific to organizations objectives. Employers should develop their employees by

equipping them and giving them opportunity to gain employability skills within or outside the

organization. Most organizations do not conduct effective training need analysis to support them

on job training. Results showed the need to support and provide opportunity for career

development. Hence, relevant training has a direct positive effect on performance of employees

and their organizations.

The employees level of education is important and has major influence on the performance.

Education influence employee earnings, performance and the ability to acquire skills. They

indicated that pharmaceutical industry is knowledge intensive and very dynamic with new

development of technology. The quality of education matters a lot in the pharmaceutical industry

and other industries as well. It is important for organizations to encourage both formal and

informal education to enhance their employee performance and that of the organizations. Hence,

education level and quality influence individual performance.

It is important to provide employees with the necessary manuals and procedures they need to

help the do their job. Organizations should promote team work to improve knowledge sharing at






their work place, through autonomous work group and team building activities occasionally.

Organizations need knowledge management systems that facilitate knowledge transfer and

dissemination. Knowledge management enhance organizational performance. In promoting

Skills Development, organizations should conduct orientation or on boarding for new employees

to enable them get introduced to the organizations systems, culture and work processes. Provide

necessary tools for work. Conduct skills audit in the organizations to establish skills lacking or

required in order to deliver effectively. Skills Development has influence on organizational

performance.

Employees need job relevant skills that go beyond simple book learning and the ability to

execute a specific task. Individual’s soft skills are major contributing factors towards

performance and personal development. The findings not only show human capital investment as

a tool for value creation but also as a form of human capital risk management in organizations.

The economic literature has overwhelming evidence that stresses the importance of education in

increasing productivity. Education can affect productivity both directly, by improving basic

skills, and indirectly, by influencing training. The traditional apprenticeship not the future for

Skills Development, and is evident that quality education, relevant training, Skills Development

and knowledge management promote intrapreneurial spirits that improves organization

performance and competitiveness.

RECOMMENDATIONS

The findings of this study have various important policy implications. The organizations human

capital provides the only enduring source of wealth creation in this global knowledge and

technological era, in order to achieve sustainable profitability both in the developing and

developed countries. Identification of talent in the education sector should be encouraged. This

requires a strategy that is put in place to identify talent within the education sector in order to

fast-track it for key career specializations in short supply such as the pharmacists. Resources

needed for learning, such as curriculum materials, science laboratories, ICT and libraries should

be made available to every student. It is important to promote knowledge management through

team work and provision of Knowledge Management Systems.

More emphasis should be put to link the industry, technical training institutions, education and

research institutions. The study suggests adoption of the German Dual System that provides

training in partnership with the industry. In this system, students spend, for example, 3-4 days

per week on the basis of regulations, within the framework of training contract and mainly at the

workplace. This will promote training that is demand-driven, and to ensure that the technical and

research institutions are responsive to the requirement of industry, particularly in the priority

sectors. The study also suggests introduction of Skill Development Funds that is governed by

rules and regulation in Labour Code, as practiced in the US, the Skill Development provide

grants to community and technical colleges to provide customized job training programs for

businesses who want to train workers or upgrade the skills of their workforce. The fund made

available to employers and job seekers.






By strengthening the industry linkages, a clear industrial attachment framework should be

imposed. Organizations to develop industrial attachment policies while the institutions to ensure

their industrial attachment logbook shows what the students on attachment are to deliver. Serious

follow up of student while at the stations should be done. The industry should be involved in

curriculum development for the pharmacist so that they offer relevant training that is up to date.

Pharmacists need specialized training that is expected to specifically provide special skills

demanded by Vision 2030 that will enable them become effective in their jobs.

Regarding skills development much more need to be done to enhance employability skills of

students (pharmacists). Schools are supposed to teach basic competencies that enable students to

acquire the skills that would help them make informed life choices and that would later be valued

by the prospective employers and useful for self-employment. These competencies include:

problem-solving skills, learning skills, communication skills, personal skills and social skills. In

addition to these, more important are skills which are directly required for work can be

developed through schooling. The skills such as: 1. Cognitive skills – that is demonstrated by an

intellectual grasp of the subject matter of various academic subjects such as languages,

mathematics, pure and applied sciences and social sciences. 2. Psychomotor skills – for the tasks

to be performed in an occupation, job or business and ability to apply the skills in practice and 3.

Affective skills - skills relating to a person’s attitude towards timelines, accuracy and general

commitment to quality and performance, and value of work, concept of self and others. Life

skills and Soft Skills Assessment should be integrated into curricula of institutions at all levels.

Finally, Technological change is a key driver for HR transformation. The smart thing to do

would be to invest in upskilling line managers with the ability to use the new HR technologies to

take on their strategic HR roles, and to outsource non value-adding HR Administration. This is

attainable through e-HRM Strategies such as e-learning/virtual and e-recruitment.

Areas for Future Research

Since Human Capital Investment covers other elements such as health, other studies can be done

comprehensively to include health variable, in the same industry or other industries in the

country. It is also important to note that, at the time of this study other factors were held constant

and that the study variable is subject to change in any way, further studies are highly

recommended to establish the role of human capital investments on sustainable organizational

performance and development in the organizations and the country as well.

REFERENCES

Adams, A. V., Silva, J. S. & Razmara, S. (2013). Improving Skills Development in the Informal

Sector, Strategies for Sub-Saharan Africa, International Bank for Reconstruction and

Development/The World Bank, Washington DC.

Afiouni, F. (2013). Human Capital Management: A new name for HRM? Int. J. Learning and

Intellectual Capital, Vol. 10, No. 1 pp 18 – 34.

Ariga & Brunello(2009). Are Education And Training Always Complements; Evidence From

Thailand, Thailand Journal Of Law And Policy Spring Issue 1, Vol.12.






Armstrong, M. (2009). Armstrong’s Handbook of Management and Leadership: A guide to

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